Foundations and Trends® in Marketing > Vol 5 > Issue 1

Marketing Expenditures and Word-of-Mouth Communication: Complements or Substitutes?

Guillermo Armelini, Marketing Department, ESE Business School, University los Andes, Chile, garmelini.ese@uandes.cl Julian Villanueva, Marketing Department, IESE Business School, University of Navarra, Spain, JVillanueva@iese.edu
 
Suggested Citation
Guillermo Armelini and Julian Villanueva (2010), "Marketing Expenditures and Word-of-Mouth Communication: Complements or Substitutes?", Foundations and Trends® in Marketing: Vol. 5: No. 1, pp 1-53. http://dx.doi.org/10.1561/1700000025

Published: 02 Sep 2010
© 2010 G. Armelini and J. Villanueva
 
Subjects
Individual Decision Making
 
Keywords
M37 AdvertisingM3 Marketing
Word of mouthSocial contagionViral marketingQuantitative marketingSocial networks
 

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In this article:
1 Introduction
2 Word of Mouth versus Advertising
3 What Drives Social Contagion?
4 Is Word of Mouth a Complement or a Substitute of Advertising?
5 Conclusion
References

Abstract

In this monograph we examine the extent to which word-of-mouth communication (WOM) plays a complementary and/or substitute role with regard to advertising. A review of the existing literature reveals the main similarities and differences between these constructs. We also examine the conditions in which a social contagion process is most likely. Specifically, our literature review helps us answer the following questions: whether WOM complements the advertising effect, when and how WOM can be a substitute of the marketing effort, and which issues limit WOM's ability to inform and persuade consumers. Published empirical evidence suggests that in most cases WOM complements advertising; however, three marketing strategies — viral marketing, referral reward programs, and a firm's creation of exogenous WOM — might work without advertising. This monograph concludes with a list of unanswered questions of potential interest to both researchers and managers.

DOI:10.1561/1700000025
ISBN: 978-1-60198-380-0
60 pp. $55.00
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ISBN: 978-1-60198-381-7
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Table of contents:
1. Introduction
2. Word of Mouth vs. Advertising
3. What Drives Social Contagion?
4. Is Word of Mouth a Complement or a Substitute of Advertising
5. Conclusions
References

Marketing Expenditures and Word-of-Mouth Communication

Marketing Expenditures and Word-of-Mouth Communication reviews the existing literature on WOM and advertising to determine whether and how WOM provides a complement to or substitute of advertising spending within the firm's marketing strategy. The authors highlight the main similarities and differences between WOM and advertising. After describing the conditions in which a process of social contagion is more likely to occur, the complementary/substitutive relationship between WOM and advertising is analyzed. Marketing Expenditures and Word-of-Mouth Communication helps answer the following questions: whether WOM complements the advertising effect; when and how WOM can be a substitute of the marketing effort; which issues limit WOM's ability to inform and persuade consumers. Published empirical evidence suggests that in most cases WOM complements advertising. However, three marketing strategies – viral marketing, referral reward programs, and a firm's creation of exogenous WOM – might work without advertising. The authors conclude with a list of unanswered questions of potential interest to both researchers and managers

 
MKT-025